Australian Dollar, AUD/USD, US Dollar, Fed, China, USD/JPY, Russia, Crude Oil – Talking Points
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How to trade AUD/USD
The Australian dollar found more stability on Tuesday as regional sentiment appeared to have rebounded despite the weak lead from Wall Street.
The Dow Jones, S&P 500, and Nasdaq ended the cash session lower, down 0.04%, 0.45%, and 1.16%, respectively.
US interest rate markets are behind schedule for rate cuts from the Federal Reserve, with the first such move now being priced in for early 2024.
Treasury yields in general are slightly higher along the curve today with the notable exception being the 2-year note which fell below 4.70%.
The US dollar is generally weaker across the board so far with the higher Australian and New Zealand dollar betas being the main beneficiaries.
Washington announced that Treasury Secretary Janet Yellen would visit Beijing in July, in further indications that sometimes frosty Sino-US relations may be improving.
In a speech today, Chinese Premier Li Qiang hinted at further measures to boost the world’s second largest economy.
The People’s Bank of China put the yuan stronger than expected upon fixation and this seems to help with the sentiment in the area.
The mainland CSI 300 and Hong Kong’s Hang Seng Index (HSI) both gained and appear to support the Australian ASX 200. Japanese and South Korean indices are trading in the red.
USD/JPY continues to trade near a 7-month high despite Masato Kanda’s reappointment last week as Vice Finance Minister for International Affairs.
The role oversees the FX market and in particular, if and when intervention will occur. Under his watch in late 2022, the USD/JPY pair turned back from a high above 150 in the wake of the Japanese intervention.
The bank has yet to get physically involved in 2023 although some jaw-dropping has begun as the price has been rising in 140 years.
In other geopolitical news overnight, Russian President Vladimir Putin referred to the Wagner Group as traitors. The Russian situation does not seem to have affected the markets very much yet.
Energy commodities have been mostly relatively contained so far this week. Crude oil is flat with WTI futures near $70 a barrel while the Brent contract is just above $74.50 a barrel. Gold is trading below $1,940.
Looking ahead, the US will see durable goods orders and Canada will have its CPI for May.
The full economic calendar can be viewed here.
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AUD/USD Technical Analysis – Weekly Chart
The weekly chart shows that the bearish engulfing candlestick formation was created by the price action at the end of last week. It could indicate that a reversal may be unfolding and that bearish momentum may develop.
Potential resistance would be in the 0.6800 – 0.6820 area ahead of previous peaks 0.7011 & 0.7030 and cluster area for potential resistance in the 0.0.7137 – 0.7157 area.
Support could be at 0.6574 and 0.6565 breakout points or late May low at 0.6458.
– By Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @tweet on Twitter